COMMENT ON FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q, other than purely historical information,
including estimates, projections, statements relating to our business plans,
objectives and expected operating results, the impact of and our ongoing
response to COVID-19, and the assumptions upon which those statements are based,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
involve risks and uncertainties, and future events and circumstances could
differ significantly from those anticipated in the forward-looking statements.
These forward-looking statements generally are identified by the words
"believe," "project," "expect," "anticipate," "estimate," "intend," "strategy,"
"future," "opportunity," "goal," "plan," "may," "should," "will," "would," "will
be," "will continue," "will likely result," and similar expressions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties, which may cause actual results to
differ materially from those expressed or implied in our forward-looking
statements, including the risks and uncertainties described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (Part
I, Item 2 of this Form 10-Q),"Quantitative and Qualitative Disclosures about
Market Risk" (Part I, Item 3 of this Form 10-Q), and "Risk Factors" (Part II,
Item 1A of this Form 10-Q). We undertake no duty to update or revise publicly
any of the forward-looking statements after the date of this report or to
conform such statements to actual results or to changes in our expectations,
whether because of new information, future events, or otherwise.
OVERVIEW
TrueBlue, Inc. (the "company," "TrueBlue," "we," "us" and "our") is a leading
provider of specialized workforce solutions that help our clients improve
productivity and grow their businesses. Our operations are managed as three
business segments: PeopleReady, PeopleManagement and PeopleScout. Our
PeopleReady segment offers on-demand, industrial staffing; our PeopleManagement
segment offers contingent, on-site industrial staffing and commercial driver
services; and our PeopleScout segment offers recruitment process outsourcing
("RPO") and managed service provider ("MSP") solutions. See Note 10: Segment
Information, to our consolidated financial statements found in Item 1 of this
Quarterly Report on Form 10-Q, for additional details on our operating segments
and reportable segments.
The COVID-19 pandemic
Beginning in early 2020, the coronavirus ("COVID-19") pandemic has led to a
series of significant economic disruptions globally. Throughout the pandemic,
our business has remained open and we have continued to provide key services to
essential businesses and other businesses as COVID-19 restrictions have lifted.
Currently in our two largest markets, the United States of America ("U.S.") and
Canada, vaccinations continue to be a top priority and are being supported by
governmental programs. As of October 18, 2021, approximately 57% of the U.S. and
73% of the Canadian populations have been fully vaccinated. While the
vaccination programs have helped to reopen these markets, we continue to monitor
the pandemic's evolution closely. Despite an uneven recovery in certain markets
and industries, we are seeing growth in new client wins and higher existing
client volumes, particularly in those markets and industries hit hardest by
COVID-19. In addition, our continued focus on efficiently managing costs while
investing in digital strategies and sales resources has allowed us to accelerate
our strategic priorities and emerge stronger as the economy recovers.
For additional discussion on the uncertainties and business risks associated
with COVID-19, refer to "Risk Factors" in Part II, Item 1A of this Quarterly
Report on Form 10-Q.
Third quarter of 2021 highlights
Revenue from services
Total company revenue grew 21.6% to $577.0 million for the thirteen weeks ended
September 26, 2021, compared to the same period in the prior year. The increase
was due to the recovery of client demand for our services, which experienced a
significant drop in the prior year due to the negative impact of the COVID-19
pandemic. This increase is primarily driven by improving volumes from existing
clients, including clients in industries that were disproportionately impacted
by COVID-19, as well as new client wins.


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•PeopleReady, our largest segment by revenue, experienced revenue growth of
18.9% to $349.1 million for the thirteen weeks ended September 26, 2021,
compared to the same period in the prior year. PeopleReady provides a wide range
of staffing solutions for on-demand contingent general and skilled labor.
PeopleReady has seen a continued recovery across most geographies and
industries, especially those in industries that were hit the hardest by
COVID-19, such as construction, transportation, manufacturing, retail and
hospitality. The growth in demand was partially offset by a shortage in the
supply of workers in certain markets that we believe has been temporarily
impacted by government responses to COVID-19, which have included stimulus
checks, elevated federal unemployment benefits, accelerated payments of the
child tax credit, and other direct payments to individuals. Even as workers have
exited federal and state unemployment programs late in the third quarter of
2021, we believe workers have been slow to return to the workforce for many
reasons including health or childcare concerns, and instead are relying on
personal savings or other means to supplement their income until they choose to
return to work. As compared to our other segments, PeopleReady experienced the
most pressure on the available supply of workers, primarily due to a lower
average wage, the temporary nature of the positions, and the shorter notice
period we receive to fill open positions.

•PeopleManagement, our second largest segment by revenue, experienced revenue
growth of 7.2% to $157.8 million for the thirteen weeks ended September 26,
2021, compared to the same period in the prior year. PeopleManagement supplies
an outsourced workforce that involves multi-year, multi-million dollar on-site
and driver relationships. PeopleManagement continued to see revenue growth
during the fiscal third quarter of 2021 compared to the same period in the prior
year due to significant new client wins. Estimated annualized revenue from new
client wins during the thirty-nine weeks ended September 26, 2021 was $86
million, as compared to the average of the prior three years of approximately
$60 million. However, the pace of revenue recovery slowed due to worker supply
and supply chain related production slow-downs in key industries, such as
automotive, manufacturing and retail.
•PeopleScout, our smallest segment by revenue, experienced revenue growth of
108.0% to $70.2 million for the thirteen weeks ended September 26, 2021,
compared to the same period in the prior year. PeopleScout offers RPO and MSP
solutions. PeopleScout has seen a strong recovery in volume from existing
clients, especially those in industries that were hit hardest by COVID-19, such
as travel and leisure, as well as new client wins. New client wins contributed
$5.4 million of revenue for the thirteen weeks ended September 26, 2021 within a
variety of industries including retail, health care and transportation.
Estimated annualized revenue from new client wins during the thirty-nine weeks
ended September 26, 2021 was $38 million, as compared to the average of the
prior three years of approximately $9 million.
Gross profit
Total company gross profit as a percentage of revenue for the thirteen weeks
ended September 26, 2021 increased by 210 basis points to 25.4%, compared to
23.3% for the same period in the prior year. Our staffing businesses contributed
110 basis points of improvement, primarily attributable to a benefit of 70 basis
points due to lower workers' compensation expense as a result of a reduction to
prior year reserves associated with favorable patterns in claim development, and
the remaining 40 basis points due to increased sales mix from our PeopleReady
segment, which has a higher gross margin profile than PeopleManagement, our
other staffing segment. Our PeopleScout business contributed the remaining 100
basis points of expansion from improved recruiter utilization on increasing
volumes.
Selling, general and administrative ("SG&A") expense
Total company SG&A expense increased by $28.6 million to $118.7 million, or
20.6% of revenue for the thirteen weeks ended September 26, 2021, compared to
$90.1 million, or 19.0% of revenue for the same period in the prior year, an
increase of 160 basis points. The prior period included a $4.0 million reduction
to SG&A due to government employment subsidies which did not recur in the
current period, driving an increase of 80 basis points. The remaining 80 basis
point increase was due to the temporary cost saving actions from 2020 which were
discontinued as revenue trends improved. We have continued to balance cost
discipline with preserving our operational strengths, which has positioned us
well for growth as economic conditions continue to improve.
Income from operations
Total company income from operations was $21.3 million, or 3.7% of revenue for
the thirteen weeks ended September 26, 2021, compared to $12.7 million, or 2.7%
of revenue for the same period in the prior year. The increase in income from
operations was due to improving revenue trends led by recovering industry
performance, including those disproportionately impacted by COVID-19, a series
of new client wins, and expanding gross margin, which collectively increased
income from operations margin by 100 basis points.


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Net income
Net income was $18.6 million, or $0.53 per diluted share for the thirteen weeks
ended September 26, 2021, compared to $8.8 million, or $0.25 per diluted share
for the same period in the prior year. Net income for the thirteen weeks ended
September 26, 2021 includes income tax expense of $3.3 million resulting in an
effective tax rate of 14.9%, compared to an expense of $3.7 million and an
effective tax rate of 29.9% for the same period in the prior year. The higher
effective tax rate in the prior year was due to lower benefits from hiring
credits, primarily the federal Work Opportunity Tax Credit ("WOTC"), and the
Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The difference
between our statutory tax rate of 21% and our effective income tax rate results
primarily from hiring credits, including WOTC, and the CARES Act. WOTC is
designed to encourage employers to hire workers from certain targeted groups
with higher than average unemployment rates. The CARES Act is an emergency
economic aid package to help mitigate the impact of COVID-19. Among other
things, the CARES Act provides certain changes to tax laws, including the
ability to carry back losses to obtain refunds related to prior year tax returns
where the federal tax rate was 35%.
Additional highlights
As of September 26, 2021, we were in a strong financial position with cash and
cash equivalents of $49.2 million, no outstanding debt and $293.8 million
available under our revolving credit agreement ("Revolving Credit Facility"),
for total liquidity of $343.0 million.
RESULTS OF OPERATIONS
We report our business as three reportable segments described below and in Note
10: Segment Information, to our consolidated financial statements found in
Item 1 of this Quarterly Report on Form 10-Q.
•PeopleReady provides access to qualified associates through a wide range of
staffing solutions for on-demand contingent general and skilled labor.
PeopleReady connects people with work in a broad range of industries that
include construction, manufacturing and logistics, warehousing and distribution,
retail, waste and recycling, energy, hospitality and general labor. As of
December 27, 2020, we had a network of 629 branches across all 50 states, Canada
and Puerto Rico. Complementing our branch network is our industry-leading mobile
app, JobStackTM, which connects people with work 24 hours a day, seven days a
week. This creates a virtual exchange between our associates and clients, and
allows our branch resources to expand their recruiting, sales and service
delivery efforts. JobStack is competitively differentiating our services,
expanding our reach into new demographics, and improving our service delivery
and work order fill rates, as we embrace a digital future.
•PeopleManagement provides recruitment and on-site management of a facility's
contingent industrial workforce throughout the U.S., Canada and Puerto Rico. In
comparison with PeopleReady, services are larger in scale and longer in
duration, and dedicated service teams are located at the client's facility. We
provide scalable solutions to meet the volume requirements of labor-intensive
manufacturing, warehouse and distribution facilities. Our dedicated service
teams work closely with on-site management as an integral part of the production
and logistics process, managing all or a subset of the contingent labor for a
facility or operational function. Our on-site staffing solutions provide
large-scale sourcing, screening, recruiting and management of the contingent
workforce at a client's facility in order to achieve faster hiring, lower total
workforce cost, increase safety and compliance, improve retention, create
greater volume flexibility, and enhance strategic decision-making through robust
reporting and analytics. Our On-Site operating segment includes our Staff
Management | SMX and SIMOS Insourcing Solutions branded service offerings, which
provide hourly and productivity-based (cost per unit) pricing options for
industrial staffing solutions. Client contracts are generally multi-year in
duration. The productivity-based pricing leverages a strategically engineered
on-site solution to incentivize performance improvements in cost, quality and
on-time delivery using a fixed price-per-unit approach. Both hourly and
productivity-based pricing are impacted by factors such as geography, volume,
job type, and degree of recruiting difficulty.
PeopleManagement also provides dedicated and contingent commercial truck drivers
to the transportation and distribution industries through our Centerline Drivers
("Centerline") brand. Centerline delivers drivers specifically matched to each
client's needs, allowing them to improve productivity, control costs, ensure
compliance, and deliver improved service.


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•PeopleScout offers RPO and MSP solutions to a wide variety of industries and
geographies, primarily in the U.S., Canada, the United Kingdom and Australia.
PeopleScout provides RPO services that manage talent solutions spanning the
global economy and talent advisory capabilities supporting total workforce
needs. We are recognized as an industry leader for RPO services. Our solution is
highly scalable and flexible, which allows for outsourcing of all or a subset of
skill categories across a series of recruitment, hiring and onboarding steps.
Our solution delivers improved talent quality and candidate experience, faster
hiring, increased scalability, lower cost of recruitment, greater flexibility,
and increased compliance. Our clients outsource the recruitment process to
PeopleScout in all major industries and jobs. We leverage our proprietary
technology platform (AffinixTM) for sourcing, screening and delivering a
permanent workforce, along with dedicated service delivery teams to work as an
integrated partner with our clients. Affinix uses artificial intelligence and
machine learning to search the web and source candidates, which means we can
create the first slate of candidates for a job posting within minutes rather
than days. Client contracts are generally multi-year in duration and pricing is
typically composed of a fee for each hire and talent consulting fees. Pricing is
impacted by factors such as geography, volume, job type, degree of recruiting
difficulty, and the scope of outsourced recruitment and employer branding
services included.
PeopleScout also includes our MSP business, which manages our clients'
contingent labor programs including vendor selection, performance management,
compliance monitoring and risk management. As the client's exclusive MSP, we
have dedicated service delivery teams which work as an integrated partner with
our clients to increase the productivity of their contingent workforce program.
Total company results

The following table presents selected financial data:

                                                Thirteen weeks ended                                                    Thirty-nine weeks ended
(in thousands, except percentages    Sep 26,                          Sep 27,                                    Sep 26,                            Sep 27,
and per share data)                   2021         % of revenue         2020           % of revenue                2021         % of revenue          2020            % of revenue
Revenue from services             $  577,031                        $ 474,530                                 $ 1,551,692                        $ 1,327,726

Gross profit                      $  146,502                25.4  % $ 110,464                   23.3  %       $   393,544                25.4  % $   319,848                   24.1  %
Selling, general and                 118,748                20.6       90,100                   19.0              326,657                21.1        304,681                   22.9
administrative expense
Depreciation and amortization          6,426                 1.1        7,652                    1.6               20,405                 1.3         24,002                    1.8
Goodwill and intangible asset              -                   -            -                      -                    -                   -        175,189                   13.3
impairment charge
Income (loss) from operations         21,328                 3.7  %    12,712                    2.7  %            46,482                 3.0  %    (184,024)                 (13.9) %
Interest expense and other               581                             (174)                                      1,880                            

(323)

income, net
Income (loss) before tax expense      21,909                           12,538                                      48,362                           (184,347)
(benefit)
Income tax expense (benefit)           3,267                            3,743                                       6,938                            (34,480)
Net income (loss)                 $   18,642                 3.2  % $   8,795                    1.9  %       $    41,424                 2.7  % $  (149,867)                 (11.3) %

Net income (loss) per diluted     $     0.53                        $    0.25
share                                                                                                         $      1.17                        $     (4.20)




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Revenue from services
Revenue from services by reportable segment was as follows:
                                                   Thirteen weeks ended                                                          Thirty-nine weeks 

ended

(in thousands, except       Sep 26,                     Segment % of    Sep 27,     Segment % of           Sep 26,        Growth      Segment % of     Sep 27,      Segment % of
percentages)                  2021        Growth %         total          2020         total                 2021            %           total           2020          total
Revenue from services:
PeopleReady               $ 349,056            18.9  %        60.5  % $ 293,546           61.9  %       $   908,764          13.3  %        58.5  % $   801,991           60.4  %
PeopleManagement            157,789             7.2  %        27.3      147,241           31.0              461,899          13.3  %        29.8        407,516           30.7
PeopleScout                  70,186           108.0  %        12.2       33,743            7.1              181,029          53.1  %        11.7        118,219            8.9
            Total company $ 577,031            21.6  %       100.0  % $ 

474,530 100.0% $ 1,551,692 16.9% 100.0% $ 1,327,726 100.0%


Our PeopleReady and PeopleManagement segments supply contingent workforce
solutions to minimize the cost and effort of hiring and managing permanent
employees. This allows for a rapid response to uncertain business conditions
through the ability to replace absent employees, fill new positions, and convert
fixed or permanent labor costs to variable costs.
Our PeopleScout segment transitions our clients' internal human resources and
labor procurement functions to PeopleScout on a permanent or project basis.
Human resource departments are faced with increasingly complex operational and
regulatory requirements, increased candidate expectations, an expanding talent
technology landscape, and pressure to achieve efficiencies, which increase the
need to migrate non-core functions to outsourced providers like PeopleScout.
PeopleScout can more effectively find and engage high-quality talent, leverage
talent acquisition technology, and scale their talent acquisition function to
keep pace with changing business needs.
As a result of the factors above, client demand for contingent workforce
solutions and outsourced recruiting services are dependent on the overall
strength of the economy and labor market, and trends in workforce flexibility.
Total company revenue grew 21.6% to $577.0 million for the thirteen weeks ended
September 26, 2021, and grew 16.9% to $1,551.7 million for the thirty-nine weeks
ended September 26, 2021, compared to the same periods in the prior year,
respectively. The increase was due to the recovery of client demand for our
services, which experienced a significant drop in the prior year due to the
negative impact of the COVID-19 pandemic. This increase was primarily driven by
improving volumes from existing clients, including clients in industries that
were disproportionately impacted by COVID-19, as well as new client wins.
PeopleReady
PeopleReady revenue grew to $349.1 million for the thirteen weeks ended
September 26, 2021, an 18.9% increase compared to the same period in the prior
year, and grew to $908.8 million for the thirty-nine weeks ended September 26,
2021, a 13.3% increase compared to the same period in the prior year.
PeopleReady has seen improved revenue trends across most geographies and
industries, especially those in industries that were hit the hardest by
COVID-19, such as construction, transportation, manufacturing, retail and
hospitality. The growth in demand was partially offset by a shortage in the
supply of workers in certain markets that we believe has been temporarily
impacted by government responses to COVID-19, which have included stimulus
checks, elevated federal unemployment benefits, accelerated payments of the
child tax credit, and other direct payments to individuals. Even as workers have
exited federal and state unemployment programs late in the third quarter of
2021, we believe workers have been slow to return to the workforce for many
reasons including health or childcare concerns, and instead are relying on
personal savings or other means to supplement their income until they choose to
return to work. As compared to our other segments, PeopleReady experienced the
most pressure on the available supply of workers, primarily due to a lower
average wage, the temporary nature of the positions, and the shorter notice
period we receive to fill open positions.
We believe the revenue growth has been supported by the use of our
industry-leading JobStack mobile app that digitally connects workers with jobs.
During the third quarter of 2021, PeopleReady dispatched approximately 940,000
shifts via JobStack and achieved a digital fill rate of 58%, an improvement of
seven percentage points compared to the same period in the prior year.


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PeopleManagement
PeopleManagement revenue grew to $157.8 million for the thirteen weeks ended
September 26, 2021, a 7.2% increase compared to the same period in the prior
year, and grew to $461.9 million for the thirty-nine weeks ended September 26,
2021, a 13.3% increase compared to the same period in the prior year.
PeopleManagement continued to see revenue growth due to significant new client
wins. Estimated annualized revenue from new client wins during the thirty-nine
weeks ended September 26, 2021 was $86 million, as compared to the average of
the prior three years of approximately $60 million. However, the pace of revenue
recovery slowed due to worker supply and supply chain related production
slow-downs in key industries, such as automotive, manufacturing and retail.
PeopleScout
PeopleScout revenue grew to $70.2 million for the thirteen weeks ended
September 26, 2021, a 108.0% increase compared to the same period in the prior
year, and grew to $181.0 million for the thirty-nine weeks ended September 26,
2021, a 53.1% increase compared to the same period in the prior year.
PeopleScout has seen a strong recovery in volume from existing clients,
especially those in industries that were hit the hardest by COVID-19, such as
travel and leisure, as well as new client wins. New client wins contributed $5.4
million of revenue for the thirteen weeks ended September 26, 2021 within a
variety of industries including retail, health care and transportation.
Estimated annualized revenue from new client wins during the thirty-nine weeks
ended September 26, 2021 was $38 million, as compared to the average of the
prior three years of approximately $9 million.
Gross profit
Gross profit was as follows:
                                                  Thirteen weeks ended                 Thirty-nine weeks ended
(in thousands, except percentages)            Sep 26, 2021    Sep 27, 2020          Sep 26, 2021    Sep 27, 2020
Gross profit                                 $    146,502    $    110,464          $    393,544    $    319,848
Percentage of revenue                                25.4  %         23.3  %               25.4  %         24.1  %


Gross profit as a percentage of revenue grew 210 basis points to 25.4% for the
thirteen weeks ended September 26, 2021, compared to 23.3% for the same period
in the prior year. Our staffing businesses contributed 110 basis points of
improvement, primarily attributable to a benefit of 70 basis points due to lower
workers' compensation expense as a result of a reduction to prior year reserves
associated with favorable patterns in claim development, and the remaining 40
basis points due to increased sales mix from our PeopleReady segment, which has
a higher gross margin profile than PeopleManagement, our other staffing segment.
Our PeopleScout business contributed the remaining 100 basis points of expansion
from improved recruiter utilization on increasing volumes.
Gross profit as a percentage of revenue grew 130 basis points to 25.4% for the
thirty-nine weeks ended September 26, 2021, compared to 24.1% for the same
period in the prior year. Our staffing businesses contributed 10 basis points of
improvement, primarily attributable to a benefit of 60 basis points due to lower
workers compensation expense as a result of a reduction to prior year reserves
largely associated with favorable patterns in claim development, offset by 50
basis points of compression from a non-recurring benefit in the prior year
related to a reduction in expected costs to comply with the Affordable Care Act.
Our PeopleScout business contributed the remaining 120 basis points of
expansion, with 30 basis points due to workforce reduction costs incurred in the
prior year and 90 basis points from improved recruiter utilization on increasing
volumes.
SG&A expense
SG&A expense was as follows:
                                                   Thirteen weeks ended                Thirty-nine weeks ended
(in thousands, except percentages)             Sep 26, 2021   Sep 27, 2020          Sep 26, 2021    Sep 27, 2020
Selling, general and administrative expense   $   118,748    $     90,100          $    326,657    $    304,681
Percentage of revenue                                20.6  %         19.0  %               21.1  %         22.9  %




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Total company SG&A expense increased by $28.6 million to $118.7 million, or
20.6% of revenue for the thirteen weeks ended September 26, 2021, compared to
$90.1 million, or 19.0% of revenue for the same period in the prior year. As a
percentage of revenue, SG&A increased 160 basis points. The prior period
included a $4.0 million reduction to SG&A due to government employment subsidies
which did not recur in the current period, driving an increase of 80 basis
points. We took steps during fiscal 2020 to reduce SG&A expense while preserving
our operational strengths, to ensure the business was well-positioned for growth
as economic conditions improved. Our focus on efficiently managing costs while
ensuring we continue to invest in sales resources and digital strategies has
allowed us to accelerate our strategic priorities and emerge stronger as the
economy continues to recover. The remaining 80 basis point increase was due to
the temporary cost saving actions from 2020 which were discontinued as revenue
trends improved.
Total company SG&A expense increased by $22.0 million to $326.7 million, or
21.1% of revenue for the thirty-nine weeks ended September 26, 2021, compared to
$304.7 million, or 22.9% of revenue for the same period in the prior year. As a
percentage of revenue, SG&A decreased 180 basis points. The prior period
included workforce reduction costs of $8.9 million incurred as a result of
COVID-19, a decrease of 70 basis points. This was partially offset by a
reduction in government employment subsidies received in the current year of
$3.4 million as compared to the same period in the prior year, an increase of 30
basis points. The remaining 140 basis point decrease was due to lower operating
costs in the first half of 2021 due to steps we took during fiscal 2020 to
reduce SG&A expense while preserving our operational strengths, to ensure the
business was well-positioned for growth as economic conditions improved. Our
focus on efficiently managing costs while ensuring we continue to invest in
sales resources and digital strategies has allowed us to accelerate our
strategic priorities and emerge stronger as the economy continues to recover.
Depreciation and amortization
Depreciation and amortization was as follows:
                                                  Thirteen weeks ended                Thirty-nine weeks ended
(in thousands, except percentages)             Sep 26, 2021   Sep 27, 2020         Sep 26, 2021    Sep 27, 2020
Depreciation and amortization                 $    6,426     $     7,652          $    20,405     $     24,002
Percentage of revenue                                1.1   %         1.6  %               1.3   %          1.8  %


Depreciation and amortization decreased for the thirteen and thirty-nine weeks
ended September 26, 2021 compared to the same period in the prior year,
respectively, due to assets becoming fully depreciated and amortized during
2021. Additionally, the impairment to our acquired client relationships
intangible assets of $34.7 million in the fiscal first quarter of 2020, resulted
in a decline in amortization expense for the thirty-nine weeks ended
September 26, 2021.
Goodwill and intangible asset impairment charge
Goodwill and intangible asset impairment charge was as follows:
                                                  Thirteen weeks ended                Thirty-nine weeks ended
(in thousands)                                Sep 26, 2021    Sep 27, 2020         Sep 26, 2021    Sep 27, 2020
Goodwill and intangible asset impairment
charge                                       $          -    $          -   

$ – $ 175,189


As a result of the decrease in demand for our services primarily due to the
economic impact caused by COVID-19, we lowered our future expectations, which
was the primary trigger of an impairment of our goodwill and acquired client
relationships intangible assets recorded in the thirty-nine weeks ended
September 27, 2020. As a result of our interim impairment test in the fiscal
first quarter of 2020, we concluded that the carrying amounts of goodwill for
PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units
exceeded their implied fair values and we recorded a non-cash impairment loss of
$140.5 million. The total goodwill carrying value of $45.9 million for
PeopleManagement On-Site reporting unit was fully impaired. The goodwill
impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and
$2.4 million, respectively. The impairment to our acquired client relationships
intangible assets was $34.7 million. The impairment charge for PeopleScout RPO
and PeopleManagement On-Site client relationship intangible assets was $25.0
million and $9.7 million, respectively.


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Income taxes
The income tax expense and the effective income tax rate were as follows:
                                                 Thirteen weeks ended               Thirty-nine weeks ended
(in thousands, except percentages)            Sep 26, 2021   Sep 27, 2020         Sep 26, 2021   Sep 27, 2020
Income tax expense (benefit)                 $    3,267     $     3,743          $    6,938     $   (34,480)
Effective income tax rate                          14.9   %        29.9  %             14.3   %        18.7  %


Our tax provision and our effective tax rate are subject to variation due to
several factors, including variability in accurately predicting our full year
pre-tax income and loss by jurisdiction, tax credits, government audit
developments, changes in laws, regulations and administrative practices, and
relative changes of expenses or losses for which tax benefits are not
recognized. Additionally, our effective tax rate can be more or less volatile
based on the amount of pre-tax income and loss. For example, the impact of
discrete items, tax credits and non-deductible expenses on our effective tax
rate is greater when our pre-tax income or loss is lower.
The items creating a difference between income taxes computed at the statutory
federal income tax rate and income taxes reported on the Consolidated Statements
of Operations and Comprehensive Income (Loss) are as follows:
                                                      Thirteen weeks ended                                              Thirty-nine weeks ended

(in thousands, except percentages) Sep 26, 2021 % Sep 27, 2020 %

               Sep 26, 2021         %         Sep 27, 2020     

%

Income (loss) before tax expense
(benefit)                          $    21,909                    $      12,538                      $    48,362                     $    (184,347)

Federal income tax expense
(benefit) at statutory rate        $     4,601          21.0%     $       2,633       21.0%          $    10,156           21.0%     $     (38,713)      21.0%
Increase (decrease) resulting
from:
State income taxes, net of federal
benefit                                  1,176           5.4                631        5.0                 2,455            5.1             (9,321)     

5.1

Non-deductible goodwill impairment
charge                                       -            -                   -         -                      -             -              21,849       (11.9)
CARES Act                                    -            -                 657        5.2                  (438)          (0.9)            (5,041)       2.7
Hiring tax credits, net                 (2,935)         (13.4)             (866)      (6.9)               (6,341)          (13.1)           (4,848)       2.6
Non-deductible and non-taxable
items                                      436           1.9                300        2.4                   747            1.5                (32)       0.1
Stock-based compensation                  (117)         (0.5)               237        1.9                   149            0.3              1,121       (0.6)
Foreign taxes and other, net               106           0.5                151        1.3                   210            0.4                505      

(0.3)

Tax expense (benefit) $ 3,267 14.9% $ 3,743 29.9% $ 6,938

           14.3%     $     (34,480)   

18.7%


For the thirteen weeks ended September 26, 2021 we incurred income tax expense
of $3.3 million and had an effective tax rate of 14.9%, compared to an expense
of $3.7 million and an effective tax rate of 29.9% for the same period in the
prior year. The higher effective tax rate in the prior year was due to lower
benefits from hiring credits, primarily WOTC, and the CARES Act.
The difference between the statutory federal income tax rate of 21% and our
effective tax rate of 14.3% for the thirty-nine weeks ended September 26, 2021
was primarily due to hiring credits, including WOTC, offset by state income
taxes. The tax benefit of $34.5 million for the thirty-nine weeks ended
September 27, 2020 was primarily the result of the pre-tax loss, benefits from
the CARES Act, and hiring tax credits, partially offset by a non-deductible
goodwill and intangible asset impairment charge, as described below. The higher
effective tax rate in the prior year was due to lower benefits from hiring
credits, primarily WOTC, and the CARES Act.
The CARES Act was enacted in the U.S. on March 27, 2020. The CARES Act is an
emergency economic aid package to help mitigate the impact of COVID-19. Among
other things, the CARES Act provides certain changes to tax laws, including the
ability to carry back current year losses to obtain refunds related to prior
year tax returns with a higher federal tax rate of 35%. The net operating loss
carry back benefit will vary depending on estimated results for the year.


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                      MANAGEMENT'S DISCUSSION AND ANALYSIS




WOTC is designed to encourage employers to hire workers from certain targeted
groups with higher than average unemployment rates. WOTC is generally calculated
as a percentage of wages over a twelve-month period up to worker maximums by
targeted groups. Based on historical results and business trends, we estimate
the amount of WOTC we expect to earn related to wages of the current year.
However, the estimate is subject to variation because 1) a small percentage of
our workers qualify for one or more of the many targeted groups; 2) the targeted
groups are subject to different incentive credit rates and limitations; 3)
credits fluctuate depending on economic conditions and qualified worker
retention periods; and 4) state and federal offices can delay their credit
certification processing and have inconsistent certification rates. We recognize
an adjustment to prior year hiring credits if credits certified by government
offices differ from original estimates. WOTC has been approved through the end
of 2025.
The non-deductible goodwill and intangible asset impairment charge relates to an
impairment of the carrying amounts of goodwill and other intangible assets of
$175.2 million in the fiscal first quarter of 2020. Of the total impairment
loss, $84.7 million (tax-effected $21.8 million) related to reporting units from
stock acquisitions and accordingly were not deductible for tax purposes. The
remaining impairment loss of $90.5 million (tax-effected $23.3 million) related
to reporting units from asset acquisitions and accordingly were deductible for
tax purposes.
Segment performance
We evaluate performance based on segment revenue and segment profit. Segment
profit includes revenue, related cost of services, and ongoing operating
expenses directly attributable to the reportable segment. Segment profit
excludes goodwill and intangible impairment charges, depreciation and
amortization expense, unallocated corporate general and administrative expense,
interest expense, other income and expense, income taxes, and other adjustments
not considered to be ongoing. See Note 10: Segment Information, to our
consolidated financial statements found in Item 1 of this Quarterly Report on
Form 10-Q, for additional details on our reportable segments, as well as a
reconciliation of segment profit to income (loss) before tax expense (benefit).
Segment profit should not be considered a measure of financial performance in
isolation nor as an alternative to net income (loss) on the Consolidated
Statements of Operations and Comprehensive Income (Loss) in accordance with
accounting principles generally accepted in the United States of America, and
may not be comparable to similarly titled measures of other companies.
PeopleReady segment performance was as follows:
                                                  Thirteen weeks ended                 Thirty-nine weeks ended
(in thousands, except percentages)            Sep 26, 2021    Sep 27, 2020          Sep 26, 2021    Sep 27, 2020
Revenue from services                        $    349,056    $    293,546          $    908,764    $    801,991
Segment profit                                     24,690          18,714                54,987          27,002
Percentage of revenue                                 7.1  %          6.4  %                6.1  %          3.4  %


PeopleReady segment profit grew $6.0 million and $28.0 million for the thirteen
and thirty-nine weeks ended September 26, 2021, compared to the same period in
the prior year, respectively. PeopleReady has seen improved revenue trends
across most geographies and industries, especially those in industries that were
hit the hardest by COVID-19, such as construction, transportation,
manufacturing, retail and hospitality. Segment profit margin improvements
benefited from lower workers' compensation costs due to a reduction to prior
year reserves largely associated with favorable patterns in claim development,
higher bill rates compared to pay rates, and disciplined cost management.
PeopleManagement segment performance was as follows:
                                                   Thirteen weeks ended                 Thirty-nine weeks ended
(in thousands, except percentages)             Sep 26, 2021    Sep 27, 2020          Sep 26, 2021    Sep 27, 2020
Revenue from services                         $    157,789    $    147,241          $    461,899    $    407,516
Segment profit                                       2,360           4,574                 8,697           6,063
Percentage of revenue                                  1.5  %          3.1  %                1.9  %          1.5  %


PeopleManagement segment profit declined $2.2 million and grew $2.6 million for
the thirteen and thirty-nine weeks ended September 26, 2021, compared to the
same period in the prior year, respectively. Segment profit declined for the
thirteen weeks ended September 26, 2021 primarily due to the discontinuation of
temporary cost reductions taken in 2020, as well as higher variable expense tied
to new business growth, including recruiting costs which have increased to
counteract worker supply


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                      MANAGEMENT'S DISCUSSION AND ANALYSIS




challenges. Segment profit growth for the thirty-nine weeks ended September 26,
2021 was primarily due to improving client volume and new client wins creating
operating leverage in the current year.
PeopleScout segment performance was as follows:
                                                  Thirteen weeks ended                Thirty-nine weeks ended
(in thousands, except percentages)            Sep 26, 2021   Sep 27, 2020          Sep 26, 2021    Sep 27, 2020
Revenue from services                        $    70,186    $     33,743          $    181,029    $    118,219
Segment profit                                     9,778             349                24,672              75
Percentage of revenue                               13.9  %          1.0  %               13.6  %          0.1  %


PeopleScout segment profit grew $9.4 million and $24.6 million for the thirteen
and thirty-nine weeks ended September 26, 2021, compared to the same period in
the prior year, respectively. Segment profit improved as the result of operating
leverage and increased utilization of recruiting staff as volumes recovered
within existing clients, especially those in industries hit the hardest by
COVID-19, such as travel and leisure, as well as new client wins.
FUTURE OUTLOOK
Due to the uncertainty surrounding COVID-19 and its impact on the business
environment, we have limited visibility into our future financial condition,
results of operations or cash flows. However, we believe there is value in
providing highlights of our expectations for future financial performance. The
following highlights represent our operating outlook for the fiscal fourth
quarter of 2021. These expectations are subject to revision as our business
changes with the overall economy.
•We are not providing customary revenue guidance for the fiscal fourth quarter
of 2021. However, our historical fourth quarter revenue has been consistent with
our fiscal third quarter revenue over the prior four years, excluding the fiscal
fourth quarter of 2020.
•We anticipate gross margin expansion to be between 140 and 180 basis points for
the fiscal fourth quarter of 2021 compared to the same period in the prior year.
This improvement is expected to be driven by improving revenue mix from
PeopleScout, our highest margin segment, and customer mix.
•For the fiscal fourth quarter of 2021, we anticipate SG&A expense to be between
$126 million and $130 million. We will continue to exercise disciplined cost
management while making investments in sales resources and digital strategies to
drive profitable revenue growth. We are also implementing pilot projects to
further reduce the costs of our PeopleReady branch network through a greater use
of technology, centralizing work activities, and repurposing of job roles, while
maintaining the strength of our geographic footprint. These pilots will occur
through 2021 and, if successful, could lead to additional efficiencies in the
future.
•We expect our effective income tax rate for the fiscal fourth quarter of 2021
to be between 12% and 16%.
•Capital expenditures for the fiscal fourth quarter of 2021 will be
approximately $10 million. We remain committed to technological innovation to
transform our business for a digital future. We continue to make investments in
online and mobile apps to improve access to associates and candidates, as well
as improve the speed and ease of connecting them with our clients. We expect
these investments will increase the competitive differentiation of our services
over the long term, improve the efficiency of our service delivery, and reduce
PeopleReady's dependence on local branches to find associates and connect them
with work. Examples include PeopleReady's JobStack mobile app and PeopleScout's
Affinix talent acquisition technology.
•We are actively monitoring the Occupational Safety and Health Administration's
potential vaccine and testing mandate. The impact on our results could have a
wide range of outcomes and is mainly contingent on the definition of a qualified
employee and who is responsible for paying for the testing of unvaccinated
workers. We are actively communicating with national officials to understand the
logistics behind the policy.
•We believe the additional government spending on infrastructure projects in the
American Jobs Plan, as proposed by the current administration, may generate
additional demand for industrial staffing businesses especially within the
construction, energy and transportation industries.



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Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

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